How much are you spending on advertising per vehicle sold?

[Sachin Raja]

Here's something I have been trying to figure out and gauge vs the market. How much in $ are you spending per vehicle sold?

Add up your total advertising (digital, print, tv, radio, 3rd party leads etc) per month and divide by total number of new & used vehicles sold (exclude any as is/junk or wholesale units).

I'll start. Our dealership is strictly Pre-Owned, so no new vehicles in there. (we are an independent AUTODOME, Selling Used Cars and Trucks in Mississauga, Toronto, Brampton| Used Cars Mississauga). We are 100% digital, no print, tv, radio for the last 2 years.

Taking an average for March, April, May

$456 per vehicle sold.

I would like to be down to $300 or lower of course.

I think this is a good indicator of how efficient our advertising dollars are being spent. Perhaps we can all help each other become more efficient and increase the number of sales for how much we spent.

 

[jay.lynch]

From the OEM perspective there has always been a focus on average dollars spent per new vehicle sold. While I am all about the deal I disagree with the focus... The OEM is concerned about brand awareness. My point, dealers should be focused on ROI.

 

[joe.pistell]

Jay,

I'll take the other side of the "ad cost PVR" debate.

I think its a wonderfully brilliant tool for dealers to use. On the planning side, the dealer looks at the marketplace, makes a forecast of projected units sold and multiplies the forecasted number of units sold times the budgeted "ad cost per vehicle retailed". An example would be to forecast the month to sell 100 cars at $440 ad cost. PVR = $44k in spending. The months ad budget is now established, the manager looks to find the most efficient way to deploy the ad dollars.

Once the month ends, they look back and see how well the ad spending strategy went. They divide the total ad spend by # of units sold. Our example could be: $44,000 ad spend and 115 cars were sold = $382 ad cost PVR (our manager is happy). After that, our manager drills into the data to see if they find evidence of the ad spending across the various paths to the sale.

Our manager also knows that his sales staff selling skills can significantly swing this number. Ad dollars spent get a lot more ROI when the sales team is firing on all cylinders.

Summary: This exercise is all about ad budget management (past, present and future) and it connects easily to sales performance. It's an easy to use, high level tool.

 

[cmjerry4531]

The Dealer Group I worked for aimed to be below $100 for new, and $150 for used. That didn't include Autotrader, Cars.com, Websites or CRM. With that model my store sold 30-50% of dealership sales in the county - which was about 200-350 vehicles a month.

 

[Sachin Raja]

What would the $100/150 comprise of? Just the print?

 

[Sachin Raja]

Further to my initial post, looked back at the last 1.5 years and overall average is $435. I've had lows of $270 and peaks of $650. I'm trying to figure out what the time lag is on advertising to take effect. For example, I decreased some big advertising in May, but the dealership didn't slow down until June. I increased the advertising a fair bit in June, but only in the past week things have started to pick up.

From all of my research, the majority of our buyers have been looking for a vehicle for 4-6 weeks, which coincides with my time-delay theory on advertising.

Any thoughts?

 

[Sachin Raja]

Jay,

I'll take the other side of the "ad cost PVR" debate.

I think its a wonderfully brilliant tool for dealers to use. On the planning side, the dealer looks at the marketplace, makes a forecast of projected units sold and multiplies the forecasted number of units sold times the budgeted "ad cost per vehicle retailed". An example would be to forecast the month to sell 100 cars at $440 ad cost. PVR = $44k in spending. The months ad budget is now established, the manager looks to find the most efficient way to deploy the ad dollars.

Once the month ends, they look back and see how well the ad spending strategy went. They divide the total ad spend by # of units sold. Our example could be: $44,000 ad spend and 115 cars were sold = $382 ad cost PVR (our manager is happy). After that, our manager drills into the data to see if they find evidence of the ad spending across the various paths to the sale.

Our manager also knows that his sales staff selling skills can significantly swing this number. Ad dollars spent get a lot more ROI when the sales team is firing on all cylinders.

Summary: This exercise is all about ad budget management (past, present and future) and it connects easily to sales performance. It's an easy to use, high level tool.

I totally agree with what you have said Joe! Until recently I have never had the time to delve into these types of things. Now I have hired a marketing manager and am freed up to make our dealership more efficient.

The sales staff being fired up is a HUGE thing. Now I just need to make sure that they are always firing on all cylinders!

 

[jay.lynch]

Jay,

I'll take the other side of the "ad cost PVR" debate.

I think its a wonderfully brilliant tool for dealers to use. On the planning side, the dealer looks at the marketplace, makes a forecast of projected units sold and multiplies the forecasted number of units sold times the budgeted "ad cost per vehicle retailed". An example would be to forecast the month to sell 100 cars at $440 ad cost. PVR = $44k in spending. The months ad budget is now established, the manager looks to find the most efficient way to deploy the ad dollars.

Once the month ends, they look back and see how well the ad spending strategy went. They divide the total ad spend by # of units sold. Our example could be: $44,000 ad spend and 115 cars were sold = $382 ad cost PVR (our manager is happy). After that, our manager drills into the data to see if they find evidence of the ad spending across the various paths to the sale.

Our manager also knows that his sales staff selling skills can significantly swing this number. Ad dollars spent get a lot more ROI when the sales team is firing on all cylinders.

Summary: This exercise is all about ad budget management (past, present and future) and it connects easily to sales performance. It's an easy to use, high level tool.

Joe,

Yes, a good method and metric... At least I hope everyone uses it outside their OEM meetings? My apologies for my post which was/is an incomplete thought. Where was I going?...

1. OEM uses packs to execute a brand awareness strategy utilizing a number of mediums.
2. Dealer signs for OEM approved website and co-oped SEM buy.
3. Dealer executes his market strategy.

Issue:
I see dealers so focused on diminishing their ad budgets they loose sight of the "buy now" campaigns for low funnel customers. Instead of focusing on ad budget reduction maybe the focus should be on efficiency (AKA ROI). One could argue that creating more efficiency would reduce the average spend vehicle, and it would; however, reducing the overall spend would not necessarily reduce the average spend.

Example: Many dealers SEM buys never go beyond that which includes co op. Co op SEM targets high funnel brand awareness. As a result dealers never see, understand, or realize the benefit of an effective PPC campaign targeted at low funnel customers.

 

[joe.pistell]

Further to my initial post, looked back at the last 1.5 years and overall average is $435. I've had lows of $270 and peaks of $650. I'm trying to figure out what the time lag is on advertising to take effect. For example, I decreased some big advertising in May, but the dealership didn't slow down until June. I increased the advertising a fair bit in June, but only in the past week things have started to pick up.

From all of my research, the majority of our buyers have been looking for a vehicle for 4-6 weeks, which coincides with my time-delay theory on advertising.

Any thoughts?

Oh man, it's so hard. The variables are exceptionally hard to inventory and even harder to quantify. You have to look at stats Month to Month, Year over Year and then get a feel for the "trend" of the topic.

Ad performance is affected by mega trends that are completely outside your influence (bank interest rates, used car wholesale prices, the economy (local & national), the news cycle, etc). You can spend big dollars in a sh*tty market (see 2008) and it will fail.

Ck List:
--Your OEM participation. Inventory strong? Incentives hot?
--Your OEM competition: inventory strong? Incentives hot?
--YOUR impact: inventory strong? Incentives hot?
--Your local competitors: inventory strong? Incentives hot?

Next, is your marketing message boring, sterile and predictable (read: Forgetful), or, is it hot, fresh and has a strong "call to action"?

Great lessons to be learned from the best automobile marketer in our space:



That being said, whatever your marketing message is, it needs to demonstrate your businesses culture.

 

[joe.pistell]

Lastly, I love this biz. WALK OUTSIDE YOUR DOOR RIGHT NOW.

Listen... No, I mean listen!

Can you hear it??? Cars, trucks and vans, everywhere on our continent, all racing around, burning gas AND WEARING OUT .

OEM ads help push shoppers into their funnel, it's our job to pull them thru. IMO, Car dealers message should deliver a strong "call to action".